Employers Face Rising Healthcare Costs, Mental Health Demands, and a Multi-Generational Workforce in 2025

Alera Group’s 2025 Employee Benefits Market Outlook insights on adapting to benefits change

Deerfield, IL (January 16, 2025) — The 2025 Employee Benefits Market Outlook from Alera Group, a top national insurance and financial services firm, reveals how employers are grappling with rising healthcare costs, increased demand for mental and behavioral health services, and the evolving needs of a multi-generational workforce. The second bi-annual report provides actionable strategies to help organizations balance cost pressures while delivering competitive, personalized benefits offerings to attract and retain top talent.

Key findings from the 2025 Employee Benefits Market Outlook include:

• Healthcare costs continue to outpace GDP growth: National healthcare spending is projected to rise at 5.6% annually (2023-2032), outpacing economic growth and placing a significant financial burden on employers. By 2028, healthcare spending is expected to hit $6.2 trillion, driven by the increasing prevalence of chronic conditions, rising hospital consolidation, and specialty drug costs. Employers are turning to self-funding models, captives and consumer-driven plan designs to offset premium increases.

• Mental and behavioral health remains a top priority: With mental illness affecting 23% of U.S. adults and workplace stress on the rise, employees are seeking better access to care. However, stigma, lack of awareness, and low Employee Assistance Program (EAP) utilization continue to be barriers. Employers are responding by streamlining access to mental health resources, enhancing communication strategies and promoting workplace cultures that prioritize mental well-being.

• Addressing the multi-generational workforce: With Americans working longer, employers are managing the diverse needs of Gen Z through Baby Boomers. While all generations prioritize core benefits like medical and dental coverage, younger employees place greater value on mental health services, student loan assistance, and wellness programs than the older generations. To bridge this gap, employers are increasingly expanding voluntary benefits and personalized offerings to meet varying workforce demands while managing costs.

• The pharmacy challenge intensifies: The growing demand for GLP-1 weight loss drugs and specialty medications for chronic conditions continues to drive up pharmacy spending. Employers are working to evaluate PBM contracts, adopt formulary strategies and explore biosimilar alternatives to mitigate rising costs.

“The trends we’re seeing in 2025 reflect both opportunities and challenges for employers,” said Sally Prather, Executive Vice President and Employee Benefits Practice Leader at Alera Group. “As healthcare spending rises and workforce demographics evolve, it’s critical that organizations take a proactive, data-driven approach to benefits strategy. By embracing innovation – whether that’s through technology, plan design or mental health initiatives – employers can balance costs while delivering meaningful benefits that resonate with their employees.”

The 2025 Employee Benefits Market Outlook was released on January 16, 2025, during Alera Group’s "Setting Your Strategy for the New Year: Alera Group's 2025 Employee Benefits Market Outlook” webinar. To download the full report, visit: https://cloud.aleragroup.com/eb-market-outlook-25/. For more information or to speak with an employee benefits expert, please contact your local Alera Group office or email info@aleragroup.com.